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Did the Affordable Care Act Lower Medicare Spending?

The Affordable Care Act has brought a tremendous amount of benefits for the American people since it has reduced the number of uninsured citizens to below 10 percent.

By Vera Gruessner

The Affordable Care Act and other regulatory changes were meant to reform the healthcare industry and save costs on wasteful spending. Recent results coming from the Department of Health and Human Services (HHS) show that the Affordable Care Act has done just that. HHS reported in a press release that the Medicare program spent $473.1 billion fewer on healthcare payments between 2009 and 2014 than would have happened if the cost growth trend between 2000-2008 continued.

Spending in Medicare Program

In fact, these savings are greater than the entirety of the healthcare spending the Medicare program underwent in 2015. The Affordable Care Act has brought a tremendous amount of benefits for the American people since it has reduced the number of uninsured citizens to below 10 percent, stabilized Medicare spending, and led to better quality of care by bringing attention to performance metrics and accountable care.

The Centers for Medicare & Medicaid Services (CMS) has been innovating with new payment models such as bundled payments and accountable care organizations. This has led to a focus on population health management as well as greater coordination and data sharing, which all lead to improved patient health outcomes.

A greater focus on reducing the rates of preventable hospital readmissions as well as a general move toward value-based care reimbursement has all led to more moderate spending within the Medicare program, HHS reports.

However, HHS also reported that national personal healthcare spending rose by 4.3 percent per person in 2014. Much of this is due to the rising cost of prescription drugs.

To further slow down healthcare spending within the Medicare program, some policymakers have suggested increasing the age of eligibility for Medicare beneficiaries to 67 years old instead of the current 65 years of age. One study published in Health Affairs explains that delaying the eligibility age for the Medicare program will require people to remain covered by private payers.

The researchers used longitudinal data to compare the healthcare costs associated with remaining on private insurance versus obtaining Medicare coverage at age 65. The researchers uncovered that healthcare spending dropped by 32.4 percent when the average American citizen became eligible for Medicare coverage at age 65.

Since private health insurance companies have not had as much success in negotiating prices with healthcare providers as the Medicare program, healthcare spending on a national level is actually reduced when the eligibility age for the program remains the same.

More recently, CMS has been implementing alternative payment models as well as the MACRA legislation in order to renovate healthcare reimbursement even further and ensure quality patient care.

“We want access to a system that delivers and re-enforces quality care. Our new alternative payment models are intended to recognize this and pay more for high quality care, smarter spending and care that results in healthier people,” CMS Acting Administrator Andy Slavitt stated at the American Hospital Association’s annual membership meeting.

“We announced earlier this year that more than 30 percent of Medicare FFS payments are now linked to quality and cost outcomes. This means that more than 10 million Medicare patients are getting improved quality of care by having more time with their doctors and better coordinated care. And we are on track for alternative payment models to become the predominant payment system by 2018.”

“The implementation of MACRA allows us to take the next transformative step in the Medicare program, by introducing the Quality Payment Program to pay physicians and other clinicians for quality, with a more flexible approach, common-sense approach.”

“We structured the program to be practice-driven by allowing physicians to choose their own metrics and the programs – whether the MIPS program introduced by Congress or the Advanced Alternative Payment Models that many clinicians are beginning to have experience with. MIPS is designed to be an attractive option while physicians consider ramping up over time into a variety of more advanced Alternative Payment Models. We also allow physicians who have experience with any ACOs to benefit from their experience.”

Past research has also shown that the Affordable Care Act leads to lower expenditure within the Medicare program. By incorporating value-based care reimbursement in federal programs, the Affordable Care Act was able to bring greater efficiency to the healthcare industry and, thereby, reduce medical spending. Essentially, the Affordable Care Act has made a significant impact on cutting costs within the Medicare program.


Dig Deeper:
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